Explain the behavioral problem that can result when cost-plus prices are based on variable cost.

The simplifying assumption that costs and volume vary in straight-line relationships makes the analysis of cost behav-ior much easier. What factors make this a reasonable and useful assumption in many cases?

Explain why cost predictions based on the same cost driver can differ when applying the high-low method and regression analysis. State one advantage and one disadvantage of the high-low method.

Which of the following is not a method used by managers to determine cost behavior? High-low Method Scatterplot Account analysis Regression Analysis Derivation